Takeda judgment - borrowing costs subject to new tax treatment

In autumn 2015 the Danish Supreme Court gave judgment in favour of Takeda A/S in a case about the right to deduct costs in terms of tax in connection with the issue of corporate bonds. The judgment is of great general public importance as it provides new indicators about the general tax treatment of borrowing costs and at the same time ensures that the costs relating to bond issues and transaction loans receive the same tax treatment. In the light of the judgment and two other recent judgments passed by the Danish Supreme Court Svend Erik Holm, Attorney-at-Law and Plesner Partner, and Jef Nymand Hounsgaard, Attorney-at-Law, write about the subject in the latest edition of the Danish tax journal "Tidsskrift for skatter og afgifter" (TfS).

In the judgment the Supreme Court took a position on whether in terms of tax Takeda as the issuer of corporate bonds could include the remuneration to the participating banks as a borrowing cost. The Supreme Court found that all remuneration to the banks consisting of so-called "combined administration, underwriting and sales commission" as well as an incentive fee could be included as a borrowing cost. It means that the Supreme Court has drawn another line in the sand in the cases about borrowing costs and a picture is beginning to emerge of the extent to which the Danish Customs and Tax Administration (SKAT) has been able to change the tax treatment in recent years.

According to the Danish Capital Gains Act, capital gains and losses on loans are calculated as the difference between the value of the debt when incurred and the value of the debt when released or repaid. The wording of the Act does not say anything about how the value of the debt is to be calculated, but it appears from the legislative history of the provision that costs relating to "incurring debt, for example fees, commission, front-end fee and stamp duty" may be included when calculating the value of the debt.

The Supreme Court has now been able to take a position on the detailed demarcation of the concept of costs outlined in the legislative history and Svend Erik Holm, Attorney-at-Law and Plesner Partner, and Jef Nymand Hounsgaard, Attorney-at-Law, write about the subject in the Danish tax journal "Tidsskrift for skatter og afgifter" (TfS).

Read the TfS article (in Danish) "Låneomkostninger - et overblik over grænsedragningen efter den seneste Takeda-dom".

Read more about the Takeda judgment passed by the Supreme Court.

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